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Altria May Never Make A Comeback

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Image Source: Altria By Brian Nelson, CFA About 15 years ago, I picked up a text from Professor Jeremy Siegel out of the University of Pennsylvania’s Wharton School of Business, The Future for Investors (1). I must have been at one of his talks. I ended up getting a signed copy from him; it was a neat experience. In any case, perhaps one of the more striking takeaways from his 2005 book was the following excerpt: Some readers may be surprised that (Altria) is a top performer for investors in the face of the onslaught of government restrictions and legal actions that have cost the firm tens of billions of dollars and threaten the cigarette manufacturer with bankruptcy. But in … Read more

High Yield Dividend Newsletter Portfolio Holdings AT&T and Philip Morris International Continue to Shine

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Image Shown: AT&T continues to surge higher this year as shares of T converge towards their intrinsic value, a process supported by recent activist investor activity directed towards the company. If you may wish to add the High Yield Dividend Newsletter to your membership, please click here. By Callum Turcan and Brian Nelson, CFA AT&T On October 28, AT&T Inc (T) reported third-quarter 2019 earnings, and the market clearly liked what the company had to say. Shares of AT&T are trading up ~4% as of this writing as the company’s stock price continues converging towards its intrinsic value, in our view. Our fair value estimate for AT&T stands at $40 per share, with room for upside, and we continue to … Read more

Philip Morris International: Free Cash Flow King With Upside Potential

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Image Shown: Philip Morris International’s Marlboro cigarette brand remains very popular worldwide. Pricing power is essential to offsetting declines in traditional cigarette sales volumes as the company positions itself for alternative tobacco products to become a larger part of its revenue streams. Image Source: Philip Morris International – Third quarter 2019 earnings presentation By Callum Turcan Philip Morris International (PM) posted third quarter 2019 earnings on October 17. As of this writing, Philip Morris International yields 5.8%, and we include shares of PM in our simulated High Yield Dividend Newsletter portfolio. While the company cut its full-year forecast for 2019 partially due to a tax charge, the deconsolidation of a subsidiary, and foreign currency headwinds, Philip Morris International is still … Read more

What’s on the Valuentum Team’s Mind?

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Let’s get the Valuentum team’s thoughts on recent developments. No changes to newsletter portfolios. Last Friday, August 16, Bank of America (BAC) CEO Brian Moynihan said in a Bloomberg interview, “We have nothing to fear about a recession right now except for fear of recession.” We sat down with the Valuentum team to get their thoughts. Let’s go around the horn. Callum Turcan: Interesting take, and I get why he thinks that way. The feedback loop of recession fears prompting businesses to invest less which in turn hurts consumer spending by weakening wage growth/employment growth rates thus leading to additional reductions in business investment. However, I think we are past the point of fear being the main enemy. Poor industrial … Read more

Generic Drug Price Deflation Continues to Weigh on Shares of Teva

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Shares of former Best Ideas Newsletter portfolio idea Teva Pharmaceuticals have come under renewed selling pressure after reporting weak quarterly results due largely to deflationary price pressures felt in the generic drug division. Teva has been relatively powerless in stopping the trend. We had removed the shares from the Best Ideas Newsletter portfolio well before the last leg down, and the Dividend Cushion ratio warned of tremendous risk to the sustainability of the dividend far in advance. By Alexander J. Poulos and Kris Rosemann Generic Drug Deflation Teva Pharmaceuticals (TEVA) maintains its position as one of the world’s largest manufacturer of generic medications, but the marketplace for a generic drug differs from the market dynamics of the branded space. We view … Read more

Teva: Progressing As Expected; US Generic Revenue Reveals Strength

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On Thursday, Teva (TEVA) reported in-line second-quarter results. For followers of the Best Ideas portfolio, the firm had a rough start shortly after it was added to the portfolio, but recent performance has put holders well into the black. For those interested in the background on the investment thesis on shares of Teva, please have a read of ‘Teva Pharma: Underpriced and Misunderstood.’ Teva’s revenue during the second-quarter nudged 3% higher, while non-GAAP operating income jumped 8%. Non-GAAP diluted earnings per share of $1.23 came in 3% higher than the same period a year ago. The company delivered organic growth in revenue and all profit lines over the comparable quarter last year. Though the results were solid, the thesis on … Read more

Big Pharma Round Up

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Though much has been made about the patent cliff—shorthand for the expiration of the patents of a large number of drugs over a short period of time—we continue to believe that pipelines across much of the pharmaceutical space are flush with new drugs and therapies. Readers may have an individual favorite or two (or three) within the space (and there’s nothing wrong with that), but we think one of the best ways for investors to play the strong pipelines across the healthcare sector—and ongoing consolidation—is through the Health Care Select SPDR ETF (XLV), a holding in the Best Ideas portfolio. The ETF boasts Johnson & Johnson (JNJ), Pfizer (PFE), Merck (MRK), Gilead Sciences (GILD), and AbbVie (ABBV) as its top … Read more

Valuentum Economic Castleâ„¢ Rating Update

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Read: Keeping the Horse Before the Cart: Valuentum’s Economic Castle™ Rating The Economic Castle Focuses on the Magnitude of Economic Value Creation The Valuentum Economic Castle™ rating is an enhancement of the competitive advantage framework (commonly known as economic moat analysis) that has become widespread and ubiquitous within the investing world. Whereas an economic moat framework evaluates a firm on the basis of the sustainability and durability of its competitive advantages, Valuentum’s Economic Castle™ rating evaluates a firm on the basis of the firm’s future economic profit spread (return on invested capital less its weighted average cost of capital). The companies with the strongest Valuentum Economic Castle™ ratings are poised to generate the most economic value for shareholders in the … Read more

Teva Pharma: Underpriced and Misunderstood

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One of the key benefits of using a discounted cash-flow model is that it allows the user to adequately price a variety of businesses, irrespective of where they are in the economic or product cycle or whether they are engaged in a turnaround or reaching peak levels of operating performance. Unlike a forward price-to-earnings (PE) ratio or even a price-earnings-to-growth (PEG) ratio, where near-term performance can cause mis-valuations at times, the DCF allows the user to forecast fundamentals through the course of the business cycle or through the course of the product cycle in order to arrive at mid-cycle profit projections, which remain critical within the framework of intrinsic value estimation. Though Big Pharma continues to steal headlines via Pfizer’s … Read more

Surveying Recent M&A Action

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The environment for merger and acquisition (M&A) activity has arguably never been better thanks to healthy balance sheets, historically low interest rates, and equity prices that speak of optimistic times. Just in the past few weeks, we’ve witnessed a number of deals come to the fore. Let’s take a look at a few of these deals and offer our quick take on the transaction. Healthcare Actavis (ACT) – Forest Labs (FRX) DUBLIN, Ireland and NEW YORK, Feb. 18, 2014 /PRNewswire/ — Actavis plc (NYSE: ACT) and Forest Laboratories, Inc. (NYSE: FRX)…announced that they have entered into a definitive agreement under which Actavis will acquire Forest for a combination of cash and equity valued at approximately $25 billion or $89.48 per … Read more